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Posts from the "Gas Tax" Category

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Without Adequate Federal Funding, Will States Raise Their Own Gas Taxes?

Connecticut state senators just voted to increase the state gas tax by three cents. The New Hampshire House Speaker has proposed cutting theirs by five cents – but only for two months, to help drivers bear the pain of high gas prices. In Georgia, the gas tax jumps every time gas prices go up by 25 cents. And at least one U.S. Senator is suggesting that more states start taking transportation funding into their own hands.

Sen. Lamar Alexander (R-TN) listens to mayors' concerns about federal funding for transportation. Photo: Alan Spearman / Commercial Appeal

After a meeting with mayors in his home state of Tennessee, where he listened as area mayors expressed concerns about the federal budget, Republican Senator Lamar Alexander said, “State and local governments will have to decide whether to have an increase in the gasoline tax.” He delivered the bitter news to the mayors that they may be getting even less money from the federal government over the next few years.

For many Republicans, that’s just as it should be. They think the federal bureaucracy is too big and more government functions should be left to the states. Alexander said that when he was governor in the eighties, he was able to fund and complete several state road projects without federal dollars.

But the mayors he spoke to were concerned. According to the Commercial Appeal, they explained that most transportation projects get 80 percent of their funding from the feds with just a 20 percent local match. They count on those federal dollars.

Alexander didn’t specify how much the state should raise the gas tax, but he indicated that tourists and truckers would “pay for a big share of it,” perhaps as a way to help local politicians sell the idea of a higher state gas tax to constituents.

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The Economist: Rock-Bottom U.S. Gas Tax Makes Gas Cheaper Than Water

Gas prices are up to $3.23 a gallon this week, according to AAA. But before drivers complain about “pain at the pump,” they should compare U.S. gas prices to those in the rest of the developed world. A liter of gas costs about 80 cents. A liter of Fiji bottled water costs about $4.00.

According to Ryan Avent at the Economist, the low prices are “almost entirely due to the rock bottom level” of gas tax rates in the U.S. Avent goes on:

The low cost of petrol encourages greater dependence; the average American uses much more oil per day than other rich world citizens. This dependence also impacts infrastructure investment choices, leading to substantially more spending on highways than transit alternatives. And this, in turn, reduces the ability of American households to substitute away from driving when oil prices rise.

The gas tax brings in far less than it did back in 1993, the last time it was raised, because of greater fuel economy in cars. And it’s a set price and not indexed to gas prices (which are three times higher than they were in 1993).

Avent concludes, “It’s hard to take any fiscal hawk seriously so long as this measure isn’t on the table. It’s as close to a win-win solution as one is likely to find.”

The idea may be finally gaining traction. Everyone from the deficit commission to some U.S. Senators are warming to the notion that a gas tax hike is the best way to pay for the ambitious transportation agenda that President Obama laid out and finally address some of the country’s backlogged infrastructure needs. The administration’s entire six-year, $556 billion proposal could be paid for by roughly doubling the federal gas tax. (Bringing it up to 39.3 cents a gallon for regular gas and 52.2 cents for diesel would be sufficient, according to our back-of-the-envelope calculation.) And it would still be puny compared to other developed nations.

Business Insider magazine has an editorial today called, “It’s Time For a Gas Tax.” Tom Friedman proposed a one-dollar gas tax hike in the New York Times this week. Indeed, you could add a dollar to our gas tax and gas would still be a bargain compared to some countries. But it could be just enough to encourage more sensible transportation options.

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AFL-CIO and Chamber of Commerce Ask For a Gas Tax Hike; Senators Agree

At an EPW hearing last month, a witness told Senators that to visualize the number of unemployed construction workers, they should picture the Dallas Cowboys stadium, which seats 100,000 people -- times 20. That point hit home with Sen. Boxer. Today, she helped her fellow Senators with the visual. Photo courtesy of the Senate EPW Committee.

Against all odds, in a time of high unemployment and Republican attacks on spending, momentum may finally be building for a gas tax increase.

Business and labor came together to make a rare show of unity today to push for a robust transportation reauthorization with adequate investment for infrastructure. And they spoke out loud and clear for a higher gas tax. Most surprising of all – it seemed that Senators were finally ready to have a mature discussion about it.

The gas tax has been a third rail issue lately. While finance and infrastructure experts roundly agree on the need to raise the tax – which hasn’t been increased since 1993 and whose purchasing power has been gutted by inflation and improved fuel efficiency – politicians have been unwilling to get behind a tax hike during a down economy.

Enter Tom Donohue and Richard Trumka, two towering figures in U.S. economic life. Donohue, the cantankerous chief of the U.S. Chamber of Commerce, and Trumka, the man’s man who heads the AFL-CIO, don’t agree on much. In fact, a favorite joke of today’s Senate hearing, where the two appeared together, centered on the strange-bedfellow nature of their joint push for infrastructure investment.

“The fact that Tom Donohue and I appear before you today does not mean that hell has frozen over or unicorns are now roaming the land,” Trumka joked in his opening statement at the Environment and Public Works Committee hearing. Delaware Democrat Tom Carper interjected, “When I walked up here from the train station this morning I did see a pig fly overhead.”

Carper noted that he was one of the only people on the Hill willing to support a modest increase in the gas tax to pay for infrastructure and deficit reduction. He has suggested raising it a penny a month for 25 months. The deficit commission has moderated that proposal, recommending a penny a quarter for three and a half years (resulting in a 15-cent increase), with all of the revenues going to infrastructure.

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Actually, Highway Builders, Roads Don’t Pay For Themselves

Cumulative Net Difference Between Spending on Highways and Highway “User Revenues”

Since 1947, American highways have run up a deficit bigger than $600 billion, in 2005 dollars. Source: U.S. PIRG

You’ve heard it a thousand times from the highway lobby: Roads pay for themselves through “user fees” — a.k.a. gas taxes and tolls — whereas transit is a drain on the taxpayer. They use this argument to push for new roads, instead of transit, as fiscally prudent investments.

The myth of the self-financed road meets its match today in the form of a new report from the U.S. Public Interest Research Group: “Do Roads Pay For Themselves?” The answer is a resounding “no.” All told, the authors calculate that road construction has sucked $600 billion out of America’s public purse since the dawn of the interstate system.

The Myth of the User Fee

First, let’s dispense with the idea that the gas tax – the primary source of financing for federal transportation projects – is a user fee.

“If you go to a state park and pay the fee to get in there, that’s a user fee,” report author Dan Smith, U.S. PIRG’s transportation associate, told Streetsblog. “If you’re driving down the road and you have to pay the toll for driving on that specific road, that’s a user fee.”

But people also pay gas taxes to fill up their lawnmowers. And those lawnmowers don’t usually end up on the highway. Just because you fill your tank doesn’t mean you ever drive on the roads funded by the gas tax you pay.

The Catch-22

Then there’s the huge contradiction underpinning the core arguments for highway expansion. Do new roads cut congestion, or do they “pay for themselves”? Highway lobbyists try to have it both ways, but the truth is that neither of these propositions hold water.

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Don’t Waste the Next Two Years: A Blueprint for Reform Under GOP Control

So longtime chair James Oberstar is gone from the House Transportation and Infrastructure Committee, and the Republicans in charge now are unlikely to take up a transportation bill as expansive as the one he proposed last year. That doesn’t mean transportation advocates should take the next two years off. In “Moving Past Gridlock: A Proposal for a Two-Year Transportation Law” [PDF], Robert Puentes of the Brookings Institution’s Metropolitan Policy Program argues that there’s a lot to do even in the absence of a long-term reform bill.

With incoming Transportation Chair John Mica refusing a gas tax increase, reformers can still make progress in the next two years. Image: ##http://dc.streetsblog.org/2009/06/17/mica-new-federal-transpo-bill-should-have-the-need-for-speed/##Orlando Sentinel##

With incoming Transportation Chair John Mica refusing a gas tax increase, reformers can still make progress in the next two years. Image: Orlando Sentinel

The House recently approved a sixth extension of the current transportation law, this one lasting for nine months. Incoming Chair John Mica (R-FL) says he wants to work on a new six-year reauthorization, but there’s no reason to believe it’ll proceed smoothly without a robust financing mechanism in place. For now, lawmakers can’t agree on a way to stabilize the highway trust fund and adequately finance transportation.

If a long-term reauthorization proves impossible, Puentes argues for a deficit-neutral, short-term reauthorization rather than continue with endless extensions. He calls it SAFETEA-TWO.

Why a two-year bill? For one thing, it’s hard for construction projects to move forward with certainty under these short-term, temporary extensions. Contractors and states are timid about undertaking ambitious projects when the future of federal funding isn’t firm.

Another reason boils down to timing. Rep. Jim Oberstar (D-MN) introduced his reauthorization bill to great fanfare in June 2009, but there was no agreement on a funding mechanism, as lawmakers refused to get behind a gas tax increase. They haven’t made any progress on that yet. Puentes hopes that in two years, with the 2012 presidential campaign season behind us and, one hopes, a stronger economy, a gas tax increase might gain traction.

So what can transportation advocates do in the next two years? And what can a SAFETEA-TWO accomplish? Here’s what Puentes recommends:

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Deficit Commission Pushes For Anti-Sprawl Reforms

If political pandering and bad economic policies have encouraged sprawl and an autocentric transportation system, better incentives can start to correct past mistakes. Here’s one place to start: the National Commission on Fiscal Responsibility and Reform report, released this Wednesday.

Sorry, your vacation home may no longer be eligible for a mortgage interest deduction.

Sorry, but under the deficit commission's recommendations, your vacation home may no longer be eligible for a mortgage interest deduction.

The report has plenty to make anyone squirm. As co-chair Alan Simpson said when he and co-chair Erskine Bowles released their co-chairs’ report last month, “We have harpooned every whale in the ocean and some of the minnows.”

Once unthinkable, even defense spending is recommended for massive cuts. Meanwhile, the rich would be in line for even bigger tax cuts than they’ve been enjoying these last few years.

Smart-growth advocates are most interested in the report’s recommendations on transportation funding and mortgage deductions. We reported last month that the co-chairs’ initial report floated the idea of eliminating the mortgage-interest deduction entirely. That would promote more compact and sustainable development by discouraging people from buying “as much house as they can,” but it would also cause significant pain for a lot of middle-income homeowners who calculated their domestic budgets based on that tax credit.

The full commission’s report took the middle ground: lowering the deduction cap for expensive primary homes and eliminating it entirely for second homes. Action like that would be a positive way to dis-incentivize irresponsible growth, given the sprawling nature of so many people’s “country” homes, not to mention the obvious disproportionate number of wealthy people affected by that provision.

The commission also tackled transportation reform, saying, “Before asking taxpayers to pay more for roads, rail, bridges, and infrastructure, we must ensure existing funds are not wasted. The Commission recommends significant reforms to control federal highway spending.”

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Another Day, Another Revelation That a Gas Tax Hike Is Necessary

Add another vote in favor of increasing the gas tax to pay for infrastructure investment. A few weeks ago, a couple of senators proposed raising it 25 cents. Then the deficit commission came out in favor of a 15-cent hike. And now, three left-leaning think tanks – Demos, the Economic Policy Institute, and The Century Foundation – are calling for a bump in the fuel tax too.

Here comes yet another push for a higher gas tax (only to be met by yet another pushback by anti-tax policymakers.) Photo: ##http://dc.streetsblog.org/2010/03/31/could-gas-tax-bonds-pay-for-the-next-federal-transportation-bill/##Pop and Politics##

Another push for a higher gas tax will be met by yet another pushback by anti-tax policymakers. Photo: Pop and Politics

The three groups have come together in a coalition they’re calling Our Fiscal Security to release a new report, Investing in America’s Economy: A Budget Blueprint for Economic Recovery and Fiscal Responsibility. In it, they throw their support behind a gas tax proposal made last year by the Congressional Budget Office [PDF].

Here’s what Demos, et al. have to say about it:

Increasing taxes on motor fuels would raise significant revenues while decreasing negative social externalities such as pollution and traffic congestion. Revenue from the tax would recapitalize the highway trust fund, thereby providing badly needed funding for transportation infrastructure.

Including state and local taxes, CBO estimates that the average national tax rate per gallon of fuel is 40.3 cents on gasoline and 46.6 cents on diesel. CBO projects that raising federal fuel excise taxes by 25 cents a gallon would generate $305.1 billion over 2010-19… Raising federal fuel excise taxes by 50 cents a gallon, for example, would generate $604.8 billion over 2010-19 (CBO 2009).

Even better, their priority for the revenue is mass transit. They say transit reduces emissions and improves access for the poor.

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Our Stagnant Gas Tax Rate Is Making the Deficit Worse

Despite the anti-tax rhetoric of this round of elections, there’s been a little flurry of support for raising the gas tax lately. Two senators just proposed bumping it by 25 cents to replenish the highway trust fund. And the National Commission on Fiscal Responsibility and Reform included a gas tax hike in its proposal for reducing the deficit by $3.8 trillion. Their proposal [PDF] is simple.

Gradually increase gas tax to fund transportation spending

  • Raise gas tax gradually by 15 cents beginning in 2013
  • Dedicate funds toward fully funding the transportation trust funds and therefore eliminating the need for further general fund bailouts

Raise the gas tax, cut the deficit. Image from Utanito via ##http://www.treehugger.com/files/2009/08/gas-tax-united-states.php##Treehugger##

Raise the gas tax, cut the deficit. Image from Utanito via Treehugger

Well, that’s clear enough. Highways cost money. You gotta pay to pave, and Americans aren’t paying.

Bloomberg quotes leaders on both sides of the aisle who lambasted the report. “Democratic House Speaker Nancy Pelosi called the targeting of Social Security and Medicare ‘simply unacceptable,’ and Republican Representative Jeb Hensarling of Texas expressed opposition to proposals to raise taxes.” Everyone from AARP to the AFL-CIO lined up to slam the plan.

The co-chairs of the Commission even joke about the unpopularity of their proposals. “We have harpooned every whale in the ocean and some of the minnows,” said Republican former Wyoming senator Alan Simpson. Erskine Bowles, former chief of staff to President Bill Clinton, joked that they’d have to enter a “witness protection program.”

They also proposed eliminating the tax deduction for mortgage interest payments – or at least restricting the tax breaks so that second homes, expensive homes, and home equity loans weren’t eligible.

The mortgage tax break is a sprawl-inducer, encouraging people to buy “more house” for their money. Besides, home ownership rates are higher in the suburbs, since urbanites are more likely to rent. By removing the tax break, as the deficit commission recommends, they would require people to pay the full cost of the house they buy – and stop subsidizing the choice to live in the suburbs instead of cities.

Which brings us back to the gas tax. Politicians cower when drivers complain about paying more at the pump, so instead they just let the highway trust fund run dry and then raid the general fund to replenish it – meaning we’re all paying for their refusal to cover the cost of highways.

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Fred Barnes: Americans Mainly Want to Stay in Their Cars

Wider

Adding a few more lanes should do the trick. Photo of the 405: Atwater Village Newbie

After yesterday’s electoral drubbing, the Obama administration will have to deal with a starkly different Congress when they make their expected push for a multi-year transportation bill early next year. We know that some influential House Republicans, like John Mica, don’t necessarily believe that bigger highways will solve America’s transportation problems. And we know that some pro-transit voices in Washington originate from the right. But no one expects the GOP ascendancy to make transportation reform any easier.

For a taste of the right-wing line against transportation reform, check out the election week issue of the Murdoch-owned Weekly Standard. Inside, editor Fred Barnes (under fire recently for accepting speaking fees from the GOP) mounts an attack on just about every federal transportation policy other than highway spending. There’s nothing really conservative about Barnes’s screed — it could have come straight from the pen of an asphalt industry lobbyist. Wondering what a transportation bill would look like if it were reshaped according to what highway boosters believe should be the “core program”? Read Barnes and find out.

He starts by ridiculing Ray LaHood’s speech at the 2010 National Bike Summit, where the transportation secretary said that Americans “want out of their cars, they want out of congestion, they want to live in livable neighborhoods and livable communities.” Barnes disagrees:

LaHood was half right. People hate traffic congestion. But they want to get out of their cars about as much as they want to get stuck behind a bicyclist who rides at a donkey’s pace before running through red lights and stop signs. What people mainly want is to stay in their cars and have LaHood do something to reduce congestion.

Like finance the construction and maintenance of highways and bridges to facilitate the flow of autos and trucks. That, rather than promoting “livability” or “the end of favoring motorized transportation at the expense of nonmotorized,” is the job of the Department of Transportation. Always has been.

This is, basically, his entire argument: People just want to “stay in their cars.” We have zero interest in getting around any other way. According to Fred Barnes, we are perfectly content to drive and drive and drive, as long as we don’t have to put up with all the other people driving. If you believe that, then his cheerleading for highway construction makes a lot of sense.

If being inside our cars is what we’re really all about, by all means lets throw more money down the sinkhole of highway expansion. That will guarantee more quality time inside our cars. Then, a few years later, when we’re in our cars but not enjoying it so much because the new lanes are jammed with traffic again, we’ll repeat the whole expensive process.

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New Report Examines the Media’s Role in the Gas Tax Debate

study.pngChart: University of Vermont Transportation Research Center

The success of state-level plans to increase gas taxes is tied to the media’s portrayal of the proposals in question, with narratives tied to "crumbling infrastructure" and "economic progress" showing more success than those emphasizing long-term transportation budget gaps, according to a new report released by the University of Vermont’s Transportation Research Center (TRC).

The TRC report examined six states where lawmakers debated raising gas taxes to close infrastructure budget gaps between 2006 and 2009. Three of the states ultimately approved gas tax increases (Oregon, Minnesota, and Vermont) — two of them over the opposition of the governor, as seen in the third column of the above chart — and three of the state (Massachusetts, Idaho, and New Hampshire) nixed the proposed tax increases.

While acknowledging that "there are many possible explanations for the success and failure of gasoline tax increases at the state level," TRC researcher Richard Watts attempted to categorize the "frames" used to depict the proposals in local media as well as the Associated Press wire service.

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